Spending Down on Year-over-Year Basis, However…
According to data released by the U.S. Census Bureau, nonresidential construction spending expanded 0.6% in November, totaling $719.2 billion on a seasonally adjusted basis. Despite the month-over-month expansion, nonresidential spending fell 1.3% from November 2016. Private nonresidential construction spending is down 3.1% year-over-year, while public-sector spending increased 1.7% over the same period. Spending in the manufacturing and power categories, two of the larger nonresidential subsectors, fell by a combined $21.7 billion over the past year.
This month’s release represented a stark reversal of the preexisting trends.
This month’s release represented a stark reversal of the preexisting trends. For much of the past several years, the pattern in nonresidential construction spending has been one in which a number of private categories expanded briskly, including lodging and office, while a host of public construction categories experienced stagnant to declining spending. That changed in November, with public construction rising and private construction contracting on a year-over-year basis.
There are a number of potential explanations, including growing concerns regarding overbuilding in a number of large metropolitan areas in lodging, office, and commercial categories. Given such concerns, financiers may also be less willing to supply financing to a variety of private projects. At the same time, the U.S. housing market is the strongest it has been in at least a decade, helping raise sales prices and expand assessable residential tax bases. That, in turn, has supplied additional resources for infrastructure. Over the past year, this has been particularly apparent in the educational and public safety categories.
Nonresidential Spending Growth, Millions of Dollars, Seasonally Adjusted Annual Rate